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The Xero Limited (ASX: XRO) share price surged to a new record high of $98.49 on Monday. Here’s why I think it can surge past $100 per share in 2020.

Why the Xero share price is at an all-time high

Unlike many other ASX companies, the August earnings season is not the catalyst for Xero’s latest share price surge.

In fact, Xero isn’t expected to report its half-year results until 12 November 2020. That means there are other factors pushing the Xero share price higher and the biggest is momentum.

Xero is part of the ‘WAAAX’ group of ASX tech shares that are currently rocketing higher. That includes Afterpay Ltd (ASX: APT) and WiseTech Global Ltd (ASX: WTC) shares.

Afterpay shares surged to a new record high of $83.00 per share on Monday while the WiseTech share price jumped 34% in one day after a strong full-year earnings result last week.

I think the strong tech performance has drawn investors towards Xero shares, despite no announcements.

Clearly, it’s also got a solid business underpinning this growth. The Xero share price has rocketed higher for a number of years on the back of strong subscriber acquisition and retention.

The coronavirus pandemic has weighed on Xero’s operations in the early part of FY21. However, Xero’s annual meeting update on 13 August reported total subscribers of 2.38 million as at 31 July 2020. That includes 96,000 in net subscriber additions in the first 4 months since 31 March.

I think the strong focus on cloud accounting is tailor-made for the changing working environment this year. Xero continues to sign big clients and develop its platform with a focus on usability and scalability.

The company’s financial growth is astronomical, including a 30% jump in FY20 operating revenue to $718.2 million. Revenue and subscriber numbers are strong across Australia, New Zealand, the United Kingdom, North America and the Rest of World segments.

That has underpinned the strong Xero share price run and I think it can crack $100 per share this year. Xero appears to be in a great spot to increase its value with smart strategy execution in the short to medium-term. 

What’s not to like about Xero?

The one thing to be a little hesitant of is the lofty price-to-earnings (P/E) valuation. The Xero share price trades at a P/E ratio of 4,652.3 – that’s a lot to pay for future earnings.

That could make investors wary of buying in, especially at an all-time high. However, these are extraordinary times and Xero is a high growth company.

That means the Kiwi software group is worth watching ahead of its 12 November half-year earnings release for any major changes to the current trajectory.

More reading

• 3 ASX shares that could give investors a stock split in 2020
• ASX 200 rises 0.3%, Afterpay up on European plans
• 2 ASX growth shares to buy with $2,000
• Is this ASX 200 market too greedy right now?
• On a day when the ASX 200 is going nowhere, these popular “coronavirus shares” are hitting record highs

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of WiseTech Global. The Motley Fool Australia owns shares of AFTERPAY T FPO and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Integral Diagnostics Ltd (ASX: IDX) share price is on watch this morning following the release of its full year financial results.

Integral Diagnostics is an Australian healthcare services company that provides diagnostic imaging services to medical and healthcare staff and their patients. It operates under a range of brands including: Lake Imaging, South Coast Radiology, Global Diagnostics and Western District Radiology.

Another solid year of revenue and profitability growth

The group recorded statutory net profit after tax (NPAT) for the 12 months to June 30 2019 of $23.0 million. This was a 9.5% increase on FY 2019. Operating NPAT for Integral Diagnostics came in at $31.2 million, a strong increase of 21.9% on the prior year.

Meanwhile, operating revenue for the full year was $274.1 million, an increase of 18.7%.  This compared to annual revenue growth of 22.9% during FY 2019. This was a solid result considering the impact of COVID-19.

Operating EBITDA for FY 2020 for the group was $64.1 million for FY 2020, while the EBITDA margin came in at 23.3%. This was a slight increase on the EBITDA margin recorded in FY 2019 of 22.9%.

Market update on acquisitions

Integral Diagnostics completed the acquisition of Imaging Queensland on 1 November 2020. The group noted that the integration of Imaging Queensland has been more or less in line with expectations, considering the impacts of the coronavirus pandemic.

Another recent acquisition has been Ascot Radiology in New Zealand. This acquisition was announced back in early June and includes nine diagnostic imaging clinics. Integral Diagnostics anticipates that this acquisition will be completed by the beginning of September.

Net debt increased during FY 2020 increased by $5.4 million to $124.4.0 million. However, the group still ended the year in a reasonably solid balance sheet. Free cash flow was $56.6 million at the end of June. A capital raising occurred in September last year, successfully raising an additional $72 million in funds.

Integral Diagnostics chair Helen Kurincic said despite a COVID-19 punctuated year, FY20 was another solid performance for IDX shareholders, with statutory NPAT of $23m, 9.5% higher than PY.

“IDX achieved strong organic revenue growth prior to COVID-19 impacting from March, recovery commenced in May, with June revenues largely in line with pre-COVID-19 expectations,” she said.

Dividend and market outlook

Integral Diagnostics declared a fully franked final dividend of 4.0 cents per share. This brought its full year dividend to 9.5 cents per share, compared to 10 cents in FY 2019.

Management priorities for FY 2021 include driving further organic growth, while further integrating prior acquisitions and striving to achieve higher efficiency gains. Integral Diagnostics will also ramp up the use of digital and artificial intelligence technology. In addition, Integral Diagnostics will continue to manage the impacts of the pandemic.

The Integral Diagnostics Ltd (ASX: IDX) share price closed yesterday at $3.92.

More reading

• Analyst says Tesla best-case scenario could see share price spike 70% to $3,500
• Why the Xero share price can crack $100 per share in 2020
• Blackmores share price in focus after sharp profit decline in FY 2020
• Qube share price on watch as underlying profit slumps 15%
• 3 ASX dividend shares to buy before it’s too late

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Blackmores Limited (ASX: BKL) share price will be in focus on Tuesday after revealing a sharp decline in profit in FY 2020.

How did Blackmores perform in FY 2020?

For the 12 months ended 30 June 2020, Blackmores posted revenue of $568 million and a reported net profit after tax of $18.1 million on. This was 3% and 66% decline, respectively, year on year. The latter compares to the guidance range of $17 million to $21 million given with its half year results.

The main drags on the company’s sales performance in FY 2020 were its ANZ and China businesses. The ANZ business posted a 15% decline in sales to $227 million due to lower retail foot traffic of Chinese shoppers and the impact of the pandemic. Whereas the China business recorded a 16% decline in sales to $103 million. Management blamed the pandemic, a reduction in inventory levels for key customers due to upcoming new label changes, and regulatory challenges.

This offset sales growth from its International and BioCeuticals businesses. The International business recorded a 30% increase in sales to $139 million thanks largely to double digit sales growth in Malaysia, Singapore, and Indonesia. The company’s BioCeuticals business posted a 12% lift in sales to $99 million after the pandemic drove increased demand for immunity products.

In light of its weak profit result, the company will not be paying a final dividend.

Management commentary.

Blackmores’ CEO, Alastair Symington, commented: “We have finished the year with some very good results in our International markets with revenue up 30% on the prior year, BioCeuticals revenue up 7% while Blackmores strengthened its leadership position in Australia with 16.4% share of the vitamin and dietary supplement (VDS) market.”

“This is despite the unprecedented disruption due to COVID-19 and highlights the strength of our brands in meeting consumer health needs,” he added.

Mr Symington was pleased with the progress the company is making in China, despite the sales decline.

He commented: “We are making good progress in China with stronger leadership in place and, for the first time, in market dedicated resources who are close to our China consumers and using these insights for our new product innovation pipeline.”

Margin weakness.

The chief executive explained why its profits were down materially in comparison to its sales in FY 2020. He said: “Our full year results today reflect the anticipated transition to a vertically integrated business. However, this comes with a higher operating cost structure in the short term.”

“I am pleased with the improvements that have been made to ensure we have much better visibility and control of our fixed costs, while delivering a very strong operating cash performance. We will continue to step up our business improvement program to aggressively manage our cost base and improve gross margins,” he added.

FY 2021 outlook.

The company intends to enter the India market in FY 2021. And while its entry plans have slowed due to the onset of COVID-19, a Blackmores India entity has been formed and is planning for a test market entry. Management believes India represents a very attractive market.

And while no formal guidance has been given for FY 2021, management anticipates full year profit growth. Though, it has warned that this profit growth will come predominantly from the second half of the financial year.

Looking further ahead, management commented: “There is great confidence from the Board and Management that by implementing our strategic priorities, simplifying our operating model and delivering consumer led innovation consistently it will put the company back on the path to sustainable, profitable growth and restore future dividends.”

More reading

• 5 things to watch on the ASX 200 on Tuesday
• Fiji Kava share price soars 90% on Blackmores subsidiary agreement, trade paused
• 2 quality ASX shares to buy with $2,000
• CSL and 1 other ASX 200 growth share to buy for long-term growth
• Is Bubs Australia the next Blackmores?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Qube Holdings Ltd (ASX: QUB) share price is on watch after the Aussie logistics company reported a 15% drop in underlying net profit after tax.

What does Qube do?

Qube is a diversified logistics and infrastructure company founded in 2010 and headquartered in Sydney.

The company is Australia’s largest integrated provider of import and export logistics services with national operations in over 125 locations.

Why is the Qube share price on watch?

This morning, Qube reported its full-year results for the year ended 30 June 2020 (FY20) headlined by underlying net profit falling to $104.2 million.

However, Qube generated 3% more revenue in FY20 totalling $1,902.0 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) climbed 1% higher to $290.9 million.

Positively, Qube’s diversified operations across ports, bulk and logistics operations helped to mitigate the impact of the coronavirus pandemic.

Qube’s Bulk operations continued largely unaffected by COVID-19 despite weakness in other markets.

Logistics revenue climbed 15.7% to $823.2 million while ports and bulk revenue increased 5.4% to $962.2 million. The remaining non-operating revenue came from its Patrick distributions as well as its infrastructure & property segment, and its corporate & other segments.

The group’s Moorebank Logistics Park is subject to NSW Government planning approvals. The new distribution centres are part of a billion-dollar automation push with Woolworths Group Ltd (ASX: WOW).

The Qube share price is one to watch after the company announced a 21% cut to its final dividend. Qube will pay a 2.3 cents per share (cps) fully franked dividend, down from 2.9 cps in FY19.

Including the 2.9 cps interim dividend, Qube’s full-year payment will be 5.2 cps – down 8.8% from last year.

Outlook

The Qube share price is worth watching after this morning’s full-year update.

Like many companies, Qube was unable to provide FY21 guidance given the current uncertainty.

The logistics group sees weaker conditions continuing into early FY21 until COVID-19 subsides. Qube expects lower volumes in “a number of its markets” to decline with earnings subject to the severity and duration of the pandemic impacts.

However, management said the company remains well-positioned for a strong earnings recovery once volumes stabilise.

The Qube share price remains down 10.2% for the year while the S&P/ASX 200 Index (ASX: XJO) has fallen 8.4% in 2020.

More reading

• Why the Carsales share price is a recession-proof buy
• Perenti share price on watch after posting record revenue result
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises 0.3%, Afterpay up on European plans
• Why reporting season isn’t the bloodbath we expected

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Over the next month, there are 3 chances to secure ASX dividend payments above 6%. As the market picks up, high yielding dividend payments are harder to find. Moreover, all 3 of these companies have some potential to grow over the next 12 months, providing you with not only an above average dividend yield, but also a chance of share price growth.

An HR sector dividend share

The largest dividend opportunity over the next week is Ashley Services Group Ltd (ASX: ASH). The Ashley Services share goes ex-dividend on 1 September, which means you will have to buy it before that date. Ashley Services works in a range of areas in the HR field: provision of training through 3 sub brands, all of which are registered training organisations; recruitment for white collar positions via 2 separate brands; and labour hire services via 2 additional brands. 

The company has not yet posted its full-year report, however its H1FY20 report delivered very strong results. This included an increase in H1 revenues by 23.8% versus the previous corresponding period (pcp). Along with an increase in net profit after tax (NPAT) of 26.8% pcp. 

This ASX dividend share pays a 100% franked dividend of 2.7 cents per share. This is a yield of 7.11% on Monday’s closing price. Ashley Services Group has a market capitalisation of $54.71 million.

A dividend share with a turnaround opportunity

AMP Limited (ASX: AMP) hit the headlines on Monday for all the wrong reasons. The embattled financial services company has been dealing with underwhelming performance as well as several high profile cases of alleged sexual harassment. Regardless, this company remains one of the nation’s most prestigious wealth brands, despite a decade of poor returns. Moreover, if the right regime is installed, I believe the company can save its reputation and turnaround performance.

The AMP share price rose by 1.05% in Monday’s trading. This was after news of the resignation of the chair, a director, and the demotion of the CEO of the AMP Capital subsidiary. Its share price is down by 24.7% in year-to-date trading. The company is unlikely to see the highs of 5 years ago anytime soon. Its recent H1FY20 report was abysmal, recording large falls in assets under management, as well as all revenue streams except banking. 

AMP shares go ex-dividend on 18 September and will pay a 100% franked dividend of 10 cents per share. This will deliver a yield of 6.92% based on Monday’s closing price. Buying in today requires faith in the new Chair Debra Hazelton to mend relationships and build an executive team that can turn the ship around.

A consulting industry dividend share

RXP Services Ltd (ASX: RXP) is an interesting IT services company I have been watching for a while now. It has a market capitalisation of $64.4 million and is starting to find its feet in the digital services area, which now makes up ~90% of its revenues. For a small company in the consulting field, it was able to generate $127 million over the year. While this was down by 10% due to coronavirus, it is still impressive for a small company. 

In my analysis of this company I have found that it has a compound average growth rate for total sales of around 24.9% over a 9-year period. In addition, it has been able to grow its cash flow by approximately 51% per year on average, over the same period. This provides it with plenty of cash to grow the business. 

It is currently selling at a price-to-earnings ratio (P/E) of 8, which is below its average 8 year P/E of 9.88. RXP Services goes ex-dividend on 17 September and is paying a 100% franked dividend of 2.5 cents. At Monday’s closing price, this is a yield of 6.25%.

Foolish takeaway

These ASX dividend shares are all paying above 6% if you purchase at a price similar to Monday’s close, and before the ex-dividend date. However, they are not without risk. The 2 smaller companies are likely to see a fall in share price after the ex-dividend date. Nevertheless, I feel that both of them are steadily growing and should see a level of share price growth over a 6–9 month period. Moreover, you may decide to keep them in your portfolio. 

AMP on the other hand is a matter of personal choice. The company is severely ailing both in terms of culture and performance. I am sure that this is not fatal yet, and it could become a turnaround success story. But time is running out.  

More reading

• AMP still looking pretty sick even after sackings
• 6 ASX giants pay $1 billion for ripping off customers
• AMP executives resign over sexual harassment scandal
• AMP to release sexual harassment details, won’t sack anyone
• Investors call for AMP Capital CEO’s head

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Ansell Limited (ASX: ANN) share price will be in focus on Tuesday after the safety products company released its full year results for FY 2020.

How did Ansell perform in FY 2020?

For the 12 months ended 30 June 2020, Ansell posted a 7.7% increase in sales to US$1,613.7 million.

This was driven largely by the performance of its Healthcare business, which reported a 12.5% increase in revenue to US$894.6 million thanks to COVID-19 related demand for exam/single use products. This was supported by a modest 2.2% increase in Industrial revenue to US$719.1 million. Strong demand for gloves for cleaning and sanitation drove the segment’s growth.

Ansell’s earnings before interest and tax (EBIT) margin expanded by 135 basis points during FY 2020 thanks to a combination of transformation benefits and net favourable raw material costs.

Combined with its solid sales growth, this led to the company reporting a 23% increase in EBIT to US$141.8 million. It’s worth noting that on a constant currency basis, its EBIT was up 34.7% year on year.

Net profit after tax came in at US$158.7 million, up 5.2% year on year or 19% in constant currency. Whereas earnings per share was up 9.2% or 23.6% in constant currency to 121.8 U.S. cents.

The company’s operating cash flow generation was strong at US$191.7 million, leading to cash conversion of 117.7%. This allowed the Ansell board to increase its full year dividend to 50 U.S. cents, up 7% on FY 2019’s dividend. This comprises an interim dividend of 21.75 U.S. cents per share and a final dividend of 28.25 U.S. cents per share.

An unprecedented year.

Ansell’s Chairman, John Bevan, was pleased with the company’s performance in a tough economic environment.

He commented: “F’20 was an unprecedented year for the global economy but also for the Company. Despite operational challenges caused by COVID-19, Ansell was able to deliver a high quality financial result with strong growth in sales and earnings combined with robust cash flow generation and improved return on capital employed.”

“The Company has delivered EPS at the top end of its guidance range. This demonstrates not only the successful execution of the company’s strategy but also resilience of the business, reflecting the breadth of its portfolio and the balance of products, end users and geographies,” he added.

FY 2021 outlook.

Management is cautiously optimistic on the year ahead.

It explained: “The impact of COVID-19 on the global economy and the markets in which Ansell operates continues to evolve. Although we cannot predict the severity of COVID-19 around the world, we do expect it to remain a challenge through F’21 and possibly into F’22 as well. We believe the Company is well positioned to continue to respond and adapt. We have a well-balanced portfolio with strong brands that served us well in F’20 and are expected to do so in the future.”

Management is forecasting earnings per share in the range of 126 U.S. cents to 138 U.S. cents in FY 2021. This represents 3.5% to 13.3% year on year growth.

It commented: “The Company acknowledges that the COVID-19 situation is constantly evolving and presents significant uncertainty. The EPS range reflects the uncertainties from raw material pricing, foreign exchange, the ability to increase Exam/Single Use prices as needed and finally our ability to increase supply of critically needed products.”

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 2 quality ASX shares to buy with $2,000
• Why Kogan and these ASX shares just hit new record highs
• The ASX stocks that could enjoy a consensus earnings upgrade this reporting season
• Leading brokers name 3 ASX shares to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ansell Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I think Carsales.Com Ltd (ASX: CAR) is a recession-proof company. The Carsales share price jumped 2.9% higher to a new all-time high of $21.23 per share in yesterday’s trade.

Some investors are skeptical of Carsales’ $5.2 billion market capitalisation, but I think it could be a strong buy in the current market.

Here’s why I think the Aussie online classifieds business is worth a look, despite its lofty valuation and economic uncertainty.

Why the Carsales share price is climbing higher

A strong earnings result last week helped boost the Carsales share price to a new record high.

Carsales reported a 1% increase in underlying revenue to $423 million with underlying net profit after tax up 6% to $138 million.

That means the Carsales share price has now surged 15.4% higher in August and is quickly shaping up as a top outperformer amongst the S&P/ASX 200 Index (ASX: XJO).

Why I like Carsales even in a recession

The coronavirus pandemic has hit the economy hard and even caused the Carsales share price to drop 45% in the March bear market.

However, I think those investors have missed a huge opportunity for Carsales in a recession. As times get tough, people look to reduce their expenses and may even look to offload their cars.

On the flip side, many investors are wary of buying new cars when cash is tight, so demand for second-hand vehicles may surge and create a strong market for a classifieds operator.

That has been evident as government stimulus measures like JobKeeper and early access to super has seen a surge in second-hand car sales.

That means even if we see further deterioration in the economy, I think the Carsales share price could still be good value.

Foolish takeaway

The Carsales share price has rocketed to a new record high in a strong start to the week.

Long-term investors will be impressed, but those looking to buy in may be a little hesitant. However, I think the current economic conditions could be a blessing in disguise for value-minded investors.

Of course, a diversified portfolio is key here. Carsales could be a good share to buy for some stability and potentially even countercyclical sales in 2021.

More reading

• Perenti share price on watch after posting record revenue result
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises 0.3%, Afterpay up on European plans
• On a day when the ASX 200 is going nowhere, these popular “coronavirus shares” are hitting record highs
• Why reporting season isn’t the bloodbath we expected

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Perenti Global Ltd (ASX: PRN) share price is one to watch as the mining services company reported a record revenue result despite weak profits.

What does Perenti do?

Perenti is a global mining services company with subsidiaries covering surface mining, underground mining and mining support services.

That includes exploration drilling, production drilling, blasting, equipment supply and maintenance to name a few.

Formerly known as Ausdrill Limited (ASX: ASL), Perenti rebranded in August 2019.

The group has operations in 13 countries across 4 continents, has more than 8,000 employees and currently has a market capitalisation of $834 million.

Why is the Perenti share price on watch?

The Perenti share price will be worth watching after reporting an 84.9% slump in statutory profit after tax from continuing operations to $23.84 million.

That weak bottom line came despite full-year revenue climbing 3.8% higher to $2.04 billion thanks to significant depreciation expenses. Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 6.8% to $443.8 million with EBITDA margin up 60 basis points to 21.7%.

Perenti’s underground segment contributed 64% of total revenue with surface (30%) and investment (6%) generating the remainder. 

The coronavirus pandemic did weigh on the full-year result despite an overall strong result from the group.

Gold remained the primary revenue generator by commodity with 68% of earnings, followed by nickel (10%) and zinc (5%).

In terms of geography, Australia (44%), Ghana (19%) and Burkina Faso (14%) were the biggest contributors.

The group continues to focus on transforming its AMS business with a focus on earnings, cash conversion and capital management.

This follows the tragic incident involving AMS employees that shut down operations and saw the Perenti share price fall lower in November 2019.

Group cash conversion climbed to 96% in FY20, up from 89% in FY19 with return on average capital employed of 16.6%.

Net cash flow jumped 31.6% higher to $110.3 million thanks to a 50% surge in operating cash flow.

Total asset backing jumped 8.2% to $1,614.9 million during the year. That came as increased cash reserves and AASB16 accounting impacts offset a drop in plant and equipment.

Dividend

The Perenti share price is one to watch after reporting a 7.0 cents per share (cps) full-year dividend.

That includes a 3.5 cps final dividend, fully-franked, to go with the 3.5 cps interim dividend announced in February.

Based on yesterday’s closing Perenti share price of $1.20, that dividend represents a 5.8% dividend yield.

Outlook

Perenti reported work in hand of $5.4 billion for FY20 with a further $2 billion in negotiation.

$1.7 billion of revenue for this financial year is secured by order book with 82% of that in the Underground segment. That includes 69% gold exposure which is underpinned by soaring gold prices.

The Perenti share price is worth watching after reporting a near-term pipeline of $8.8 billion comprising 57 opportunities.

A geographical expansion across North America and significant internal investment is slated for FY21. 

How has the Perenti share price performed lately?

The Perenti share price remains down 25.3% for the year while the S&P/ASX 200 Index (ASX: XJO) has fallen 8.4%.

More reading

• Why the Carsales share price is a recession-proof buy
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 rises 0.3%, Afterpay up on European plans
• Why reporting season isn’t the bloodbath we expected
• Meet the group reaping the biggest profit from the gold bull run

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re on the lookout for quality fully franked dividends, then you might want to take a look at the two listed below.

Both these ASX dividend shares offer attractive fully franked dividends and appear well-positioned to grow them over the next decade. Here’s why I like them:

Coles Group Ltd (ASX: COL)

I think that Coles is a great dividend share to own right now. I’m a big fan of the company due to its defensive qualities and strong market position. The combination of the two means Coles is well-placed for growth whatever the economy throws at it. This certainly was the case in FY 2020. At a time when most other companies across the country saw their profits decline because of the pandemic, Coles delivered strong growth. It reported a 6.9% increase in sales to $37.4 billion and a 7.1% lift in net profit after tax to $951 million in FY 2020.

Pleasingly, the company has started FY 2021 strongly and looks well placed to deliver another solid profit result in FY 2021. I expect this to lead to Coles rewarding its shareholders with another dividend increase next year. Based on the current Coles share price, I estimate that it offers a fully franked 3.2% dividend yield in FY 2021.

Dicker Data Ltd (ASX: DDR)

Another fully franked ASX dividend share to buy is Dicker Data. It is a leading wholesale distributor of computer hardware and software in the ANZ region. As with Coles, Dicker Data has been able to continue its growth throughout the pandemic. This has been driven by a combination of strong demand, new vendor agreements, and favourable industry tailwinds.

So much so, the Dicker Data board revealed that it intends to increase its dividend by around a third to 35.5 cents per share this year. Based on the current Dicker Data share price, this represents a very generous 4.5% fully franked dividend yield.

More reading

• 3 ASX shares to buy and hold through COVID-19
• ASX 200 Weekly Wrap: Blue chips, earnings drag ASX lower
• Why the Wesfarmers share price could surge in 2021
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Last week, infant nutrition company a2 Milk Company Ltd (ASX: A2M) released a record result for the 2020 financial year.

I own a2 Milk shares so made some time to dig through the company’s annual report. This is a great way to get a better understanding of the challenges and opportunities that face the company. But three things in particular caught me by surprise:

1. a2 Milk Company is accumulating a huge pile of cash

The first surprise was the huge pile of cash a2 Milk has built up. In fact, in the 2020 financial year, the company’s cash position jumped by a massive 83% to NZ$854 million.

A2 Milk Company is a very capital light business. It doesn’t directly own farms or factories and doesn’t need to spend much cash to grow production. 

But what will the company do with all that cash? One option is for a2 Milk to pay a dividend to shareholders. However, a2 Milk says that a dividend is not on the cards. Instead the company is focused on using the cash to execute its long-term growth ambitions.

These include potential acquisitions and last week a2 Milk Company announced it is in discussions to acquire a controlling position in New Zealand dairy processing business Mataura Valley Milk. A2 Milk has proposed splurging up to NZ$270m to acquire a 75.1% stake in the business.

2. COVID-19 is creating problems in the US market

The COVID-19 pandemic created a bump in earnings of infant nutrition in the 2020 financial year, but it is making life a lot more difficult for sales in the United States. Higher unemployment rates and economic uncertainty have made US consumers more cautious and this has forced a2 Milk to change strategies. Price discounting and in-store promotion will now be used to drive increased volumes.

Disappointingly, a2 Milk says that it expects revenue in the US to remain flat in FY21 after jumping 91% in FY20.

3. Return on equity dropped

One surprising result of building up such a huge cash pile is that a2 Milk Company’s monster return on equity (ROE) dropped from 44% in 2019 to 40%.

Return on equity (ROE) is a company’s net profit after tax (NPAT) divided by the average shareholder equity over the year. Having a large cash pile increases the equity in the business, so we end up dividing profit by a larger number. Although this is a surprise, the cash pile gives a2 Milk options to reinvest back into the business and compound returns in the years ahead.

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• Is the A2 Milk share price still a good buy after strong full year results?

Motley Fool contributor Regan Pearson owns shares of A2 Milk.

You can follow him on Twitter @Regan_Invests.

The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post 3 big surprises from the a2 Milk Company full year results appeared first on Motley Fool Australia.

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